Alphabet, the parent company of Google, lost around £406billion in market value during a turbulent trading session in New York on Thursday, marking the second-biggest daily drop in Wall Street history. Shares in the US technology giant plunged nearly 14 per cent in early trading as investors expressed concern over its substantial spending on AI infrastructure including data centres. Only Nvidia's £450billion loss in January last year exceeded Alphabet's decline, which wiped away value equivalent to the combined market capitalisations of London-listed AstraZeneca, Rolls-Royce and Unilever. Despite the fall, Alphabet remained valued at around £2.5trillion, roughly ten times larger than Shell, the UK stock market's biggest company.
The sell-off triggered wider market turmoil, pulling down the tech-heavy Nasdaq index by nearly 2 per cent and reigniting concerns that the AI-driven stock market boom could reverse. Neil Wilson, an investor strategist at Saxo, described the impact as severe, stating that 'a drop this size blows a big hole in all the major indices, it's not a pretty picture' and noting that 'investors don't just want capex, they want to see the returns already.'
The market rout followed Alphabet's latest quarterly results, which revealed that revenues jumped 25 per cent to £95billion in the three months to the end of September. However, the performance disappointed Wall Street expectations. Profits fell by a quarter to £20billion as the company increased its spending on AI to close to £40billion. Tracy Woo, principal analyst at Forrester, said that 'the softer search performance is significant because it highlights the challenge of funding massive AI investments while maintaining the strength of established businesses.'
Investment experts flagged specific operational concerns. Russ Mould, investment director at AJ Bell, explained that 'vast spending on AI seems to be tolerated by investors if companies' earnings are unblemished' but said this was where Alphabet had struggled. He highlighted that 'Google's chatbot-style AI mode is hurting traditional search' and that while transition was anticipated, 'the deceleration in growth is still causing real disquiet.' He cautioned that Alphabet's strategy of developing its own chips, data centres and large language models faced lingering doubts among investors.
The decline will affect millions of British savers who hold exposure to US stocks through funds in their ISAs and pension pots, even if they do not own Alphabet shares directly. The sell-off demonstrates growing investor scepticism about whether enormous technology spending will translate into future profits.